300 Million Bottles of Two Buck Chuck

Two Buck Chuck (a.k.a. Charles Shaw wine) celebrated its fifth birthday recently, so this is a good excuse to for a new initial thoughts about what the success of this bargain wine says about the wine market today.

Charles Shaw is the brand of very inexpensive wines that Fred Franzia’s Bronco Wine company makes for exclusive distribution through the Trader Joe’s chain. The wines sell for $1.99 in California ($2.99 here in Washington state), which accounts for the “two buck” nickname. Total sales over five years: 300 million bottles.

Two Buck Chuck (TBC) is made possible by the current worldwide glut of wine — something that I will write more about later. There is a lot more wine made today than people will buy and so bulk prices have fallen, creating a profitable opportunity for someone, like Fred Franzia and the Trader Joe’s people, who know how to distribute and market it efficiently. Franzia is part of this glut of course, with perhaps 40,000 acres of vines. TBC aimed to find a big demand for a big supply, and it did it.

Some of my friends buy TBC and they are always amazed by the relative value: it may not be great wine, but it’s lot better than a $2 or $3 wine, they say. I think that’s true, but I wonder how they know — have they drunk a lot of $3 wine? I doubt it! Most supermarket wine buyers judge a wine by its price, or at least that is what the research says. They don’t know for sure what is in the bottle and so they are guided by price more than any other factor. I know some $8 wine buyers, for example, who probably wouldn’t buy a $5 wine under normal circumstances, because they assume that it is lower quality. And they probably wouldn’t buy a $12 wine, either, assuming that it wouldn’t be worth the extra cost. So they stick to that $6-$8 wine shelf (you know where it’s at in the grocery store), not looking higher up and not looking much lower on the rack either. They know what they like, and it costs about eight bucks.

So the trick isn’t making an inexpensive wine — that’s doable in this market environment — it’s getting people to buy it. Once you have made a decent wine that you can sell for less, the hard part is to get buyers to look down from their accustomed price points and try it — and to serve it to their friends without humiliation. If you put a TBC clone in Safeway, for example, it’s entirely possible that no one would buy it because they would assume low quality based upon the low price. That’s where Trade Joe’s comes in. Trader Joe’s has a reputation for selling upscale products for a bit less — for providing relative value. Only Nixon could go to China and only Trader Joe’s could sell Two Buck Chuck — for two bucks.

In fact, if you look around, you will actually see a lot of TBC clones in your grocery store, but they sell for more than two bucks. I am talking about the generic “critter wines” (more about this in future posts). They are also a product of the global wine glut and they provide good relative value. But no one would buy them for $2 — how could they be any good? So they sell for a bit more.

By the way, the Charles Shaw brand is actually a good deal older than the five year birthday suggests. The Charles Shaw winery was founded in the Napa Valley in 1974 by Charles F. Shaw for the purpose of making Beaujolais-style wines. Fred Franzia bought the brand from Shaw in 1991 in order to take advantage of its solid reputation. But that’s history — no one pulling a TBC cork today remembers that original Napa winery, they are only thinking about the bargain price.